Defrauded Students Win Class Certification in Lawsuit Against DeVos

SAN FRANCISCO (CN) – More than 100,000 students defrauded by Corinthian Colleges can team up to sue Education Secretary Betsy DeVos for rolling back Obama-era rules that provided full debt forgiveness, a federal judge ruled Monday.

U.S. District Judge Sallie Kim certified a nationwide class of approximately 110,000 students who claim the Education Department improperly used their private data to create a new Average Earnings rule that forces students to pay off at least some loan debt.

“It’s a recognition by the court that in fact this whole group of people was affected in the same way,” said plaintiffs’ attorney Toby Merrill, with the Legal Services Center of Harvard Law School in Jamaica Plain, Massachusetts.

Lead plaintiff Martin Manriquez sued DeVos on Dec. 20, 2017, the same day the Education Department unveiled a new formula requiring borrowers to pay back at least some debt based on the average earnings of graduates from each Corinthian Colleges program.

In May, Kim granted a preliminary injunction blocking the department from collecting on loans from more than 60,000 students who already applied for debt relief, but she refused to wipe out all of their debt as the case moved forward.

The U.S. Justice Department filed an appeal against the injunction and asked Kim to delay ruling on class certification until the Ninth Circuit decides that appeal. But Kim found the Ninth Circuit could benefit from her class certification ruling if it chooses to review the scope of the injunction. The rest of the case will remain on hold pending appeal.

In granting the injunction, Kim found it likely that the Education Department obtained income data from the Social Security Administration by improperly sharing borrowers’ personal information in violation of the Privacy Act of 1974.

Even if the appeals court disagrees with Kim’s finding on Privacy Act violations, it could also approve the injunction based on the department’s alleged failure to adequately justify revoking full debt relief for defrauded students, Merrill said.

“The Ninth Circuit can affirm on any grounds, so it has a panoply of options,” Merrill explained.

The Department of Education and Justice Department did not immediately return requests for comment Monday afternoon.

But the Education Department has previously said it never promised full debt relief. It said the new policy was enacted to help protect taxpayer money and make sure students are only compensated for “actual harm suffered.” The department further contends that privacy law exemptions allow it to use personal information for “programmatic disclosures” and “routine uses.”

Corinthian Colleges declared bankruptcy and collapsed in April 2015 after investigations by the Department of Education and numerous state attorneys general revealed fraud at more than 100 college campuses. The for-profit institution was accused of misleading students about the value of its educational programs and their ability to get higher-paying jobs after completing those programs.

Some students borrowed up to $100,000 for an education the plaintiffs have denounced as “worthless.”

Merrill said Corinthian and other for-profit colleges specifically targeted vulnerable groups of people, including single moms and communities of color.

Securing full debt relief is critical, the borrower advocate added, because many former students must choose between basic life necessities and paying off the debt. A failure to make payments on time can lead to garnished wages and bad credit, which makes it harder to find housing or buy a car to get to and from work.

“People are really suffering,” Merrill lamented.

In the opening brief for its appeal, the U.S. Justice Department wrote that Kim’s injunction is unjustified because there is “no ongoing violation of the Privacy Act” or imminent threat of future violations.

“A past violation of the Privacy Act does not ‘taint’ the use of an otherwise valid rule,” the Justice Department argued in its brief.

Last month, another federal judge in Washington D.C. blocked the Education Department from delaying the borrower-defense rule, which lets all students defrauded by for-profit colleges apply for and obtain full debt relief.